Atlas Shrugged: The Mocking

Thursday, June 30, 2011

Our Brilliant Financial Analyst Strikes Again!

There is a very good reason we devote so much time to examining the role Megan McArdle occupies in the media. It's not that she's transparently obsequious and gives us a valuable window into the world of authoritarian leaders and their sycophants. It isn't her lack of curiosity, her obliviousness regarding professional ethics and standards, or her carelessness regarding her craft, all of which inadvertently reveal her true role of propagandist and not journalist.

Defaulting does not, so far as I can see, make it easier to collect taxes from the rich--indeed, insofar as they own those bonds, or shares in the banks that will be severely hurt when those bonds are not paid, or businesses that will be hurt by the resulting financial crisis, it makes you less able to collect taxes from the rich. Cracking down on tax evasion would be a very good thing to do. But it is a very good thing to do whether or not Greece defaults, and it will not be done instantly.

Commenter dmcgregor writes:

But the tax evasion is not uniformly distributed. According to estimates from a paper (Distributional Implications of Tax Evasion in Greece, Matsaganis and Flevotomou) I read salaried employees are estimated to only under report their income by -0.6%, while farmers are around 53% and other self-employed 25% (which of course makes sense, much more room for underreporting in those areas)...but also importantly, the under reporting is strongest at the bottom and top of the income scale. So a middle class government worker who has by and large paid the taxes owed, is the one suffering because the rich can get away with under reporting their income significantly? I know life isn't fair and all, but that seems worthy of getting a little pissed off about.

Sure, but who do you think is taking the bribes to let the rich people and the farmers out of their taxes? That's right, salaried civil servants (who I guarantee are not paying taxes on their bribery income.) The wealthy, the poor, and the self-employed have the most scope for jiggering their income statistics, but you won't solve tax evasion without pretty radical changes to the way that Greece's civil service operates. Changes that the civil service has vigorously and effectively resisted at every level. Or so I understand it.

You read it here first, America. The rich are evading taxes by bribing civil servants, who also evade taxes--on their bribes!

Civil Servant: Number 294!Millionaire: It's about time. I've been waiting for two hours and those chairs were hurting my back. Now. I would like to avoid paying my taxes and therefore hope you will accept this large bribe.Civil Servant: Of course, sir. I'll just put it right here in my desk drawer with all my other bribes from millionaires.

And just to be sure to give herself an out (or to signal that she has no clue what she's writing about), she even leads that section with the caveat, "so far as I can see."

And just for more cheap laffs, her most recent column has an unintentionally hilarious opener ("The other night, I went to a drinks event for journalists at the British Embassy"), naturally followed by more embarrassing British affectations ("I'm absolutely stonkered by this"), and the sort of "creative" writing that would make a high school English teacher think twice about giving you a passing grade ("...exuding pessimism the way gatherings of grandmothers exude hugs...").

I'm saying that the very rich have the tax laws written to favor them. and bribe powerful people, not middle-class civil servants.

This is factually not in evidence. If we count state-employed doctors as civil servants, and we note the fact that nearly all doctors in Greece take bribes, this is ipso facto proof that middle-class civil servants, or at least significant subsectors thereof, in Greece generally benefit from bribes. Let's not be shocked that the Greek civil service and the Greek rich are both pretty corrupt. In any case, I'm not sure there's any black and white in this: the modus vivendi is that ordinary Greeks would get to skip taxes in return for the rich Greeks skipping much greater amounts of taxes; it's a society-wide conspiracy to just not pay tax. And now as everyone has to pay tax, people are on the streets protesting.

If you read Richard J (he is an accountant and he comments on British blogs as well as CT), he once noted an instance where France successfully installed a policy to prevent certain kinds of tax evasion by the wealthy, where Greece, seeing the French success, copied that policy and made it more punitive by something like a factor of ten. Instead of the French success, the only thing it ended up doing is scaring of foreign investors.

Exxon and G.E. paid no Federal income taxes last year, Nonny.

If you read the follow-up to the absurd hysteria, you'd notice that G.E., in fact, did pay taxes and significant amounts of them. And this is the company with the most competent and impressive tax team in just about the world, so others companies probably pay more.

It's fun to laugh at McArdle, but at the same time, every word she writes aspires to do violence against someone she doesn't know, someone with fewer resources than she has. I think, ethically, it's best she should be killed.

McMyles, who claims to laugh at the stupidity of McArdle, nevertheless feels compelled to defend her. So let's fact-check his little love note to Megan:

If we count state-employed doctors as civil servants, and we note the fact that nearly all doctors in Greece take bribes, this is ipso facto proof that middle-class civil servants...

Except that doctors are not middle class, therefore the entire argument falls apart.

Instead of the French success, the only thing it ended up doing is scaring of foreign investors.

Near as I can tell, you are referring to the crackdown which Greece has only just begun. While we all admire you Cassandra like prescience, every European country which has pursued tax evaders has reaped substantial revenue gains.

If you read the follow-up to the absurd hysteria, you'd notice that G.E., in fact, did pay taxes and significant amounts of them.

Unfortunately, GE does not agree with you. They state that they had "a small U.S. income tax liability" for 2010, not "significant amounts." Historically, their tax rate has been a fraction of what their competitors pay, largely because of various loopholes they use to avoid declaring income in the United States. This is not the product of their "impressive tax team", but rather their impressive lobbying team. Of course, that's what Susan said...

I'm somewhat annoyed that Susan of Texas is calling me a calf, given that as of the second NYTimes update today on the DSK case, it seems to indicate that she was wrong on it. (And somewhat farcically, Ben Stein turns out to be right.)

Near as I can tell, you are referring to the crackdown which Greece has only just begun.

No. This was something from years ago. The current crackdown will, in fact, yield significant revenue gains. The policy I was talking about was a highly specialized tax treatment of partnership taxation arrangements.

(The second NYT update is the one where the recorded phone conversation between the accuser and her boyfriend was revealed to include the following sentence, roughly: "don't worry, I know what I'm doing, he has a lot of money.")

I was being kind, Myles. I wanted to bring up your nanny but I thought that might be a low blow. Evidently not.

I notice you did not quote me on that case. This is why:

If you ever wondered if there was a bottom to the well of Megan McArdle's support for bankers, even IMF bankers accused of rape with a small mountain of evidence against them, the answer is no.

That is all I said about the case--I had much more to say about McArdle. And it seems that the man is guilty. If the victim of the assault is of poor character and planned to take advantage of what happened is another issue. There is no magic judging fairy and prosecutors have to gauge whether or not they can win the case, not just whether or not their victim was victimized.

That small mountain of evidence has just disappeared up a puff of smoke. It was never really there in the first place. There's now literally no reliable evidence anywhere (the forensics are tainted by the accuser ex post).

I don't think people grasp how similar this case if looking to the Duke Lacrosse one right now, but without the corrupt prosecutor. (The NY DA has acted admirably and in an exemplary matter in this case, and whatever my previous doubts about them, I must say that they have been a paragon of virtue on this one. If Cy Vance's office apologizes to DSK and family after the matter is closed, I will personally urge all my NY friends to support his re-election.)

Anyways, wrong discussion. I don't want to bring up fatuous comparisons, but this reminds me of the debate over the Iraq War, where the "Serious" people were the people who believed the (right) wrong thing in the beginning, while people who figured out that it was BS from the beginning were "Unserious" hippies. The "appropriate" side to believe is the accuser's, even though it turns out the truth is rather different. In this case, Ben Stein and BHL were "unserious", but right.

No, Myles. Evidence doesn't disappear. It wasn't tainted. The case was tainted. The case might disappear. There's a big difference. This kind of stuff happens all the time in criminal cases.

So far all you've shown us is a bunch of misinformation and what seems to be a self-satisfied belief in the superiority of the wealthy. Whether or not the latter is true your devotion to scouring the internet to prove your superiority over critics of the elite is getting more than a little tiresome.

If you could prove an argument, stick to the truth, or be amusing it would be different but instead you seem to be devoted to annoying everyone to death. I suggest stopping, or your dependence on middle class politeness won't protect you anymore.

Except that doctors are not middle class, therefore the entire argument falls apart.

Not true. While doctors are universally upper-middle class in the English-speaking world, on the Continent they are often middle class. French doctors make 60,000 a year. The impression I get is that Greek doctors are often rich, but there's no way to tell because everybody's evading all their fucking taxes and so there are no reliable statistics.

Unfortunately, GE does not agree with you. They state that they had "a small U.S. income tax liability" for 2010, not "significant amounts."

This can mean all sorts of things, but one thing it does mean is that GE most certainly did pay tax. Which means the absurd (and false) talking point that "GE paid no tax" should end, like the Fallowsian boiling frog. By the way, "small" in GE terms isn't necessarily small in absolute ones.

By the way, even aside from doctors, Greek tax-division civil servants all collect bribes on a comprehensive and near-universal scale. If we count them as a substantial subsector of the Greek civil service, it means that they do benefit from the modus vivendi of everybody-bribing-everybody. This is aside from the fact that tax collection in Greece is pure popular politics, and tax collectors are pulled off the streets in election years. So blaming wealthy Greeks, which a perfectly respectable and well-supported position, is not very illustrative: the entire country, from top to bottom, cheats on its taxes. This isn't America, where the wealthy get to cheat on their taxes while poorer citizens do not.

In any case, I am all for higher tax rates on the Greek wealthy. If they can actually get the money, that is, which is extremely doubtful. If you managed to get rich in an economy like the Greek one, you are probably also smart and crooked enough to stuff all your money away from the reach of the Greek state. So, I guess we are looking at a Greek default.

"Which means the absurd (and false) talking point that 'GE paid no tax' should end, like the Fallowsian boiling frog."

See, now this is one small point on which I'll disagree with Susan. Myles is frequently amusing, usually when he's imagined that he's just masterfully inserted some obscure reference into the debate, confident that he's dazzled us with his breadth of knowledge.

I'll now be adding, "...like the Fallowsian boiling frog," to the end of random sentences in all my correspondence and conversation. They'll all be quaking at my feet. Or is it laughing? Either way.Thanks, Myles.

These values are based on OECD statistics. Household income may represent more than one income earner.

Needless to say, your understanding of the economic situation in Europe is deeply flawed if you don't even know the income situation.

Well, I'm much more familiar with per capita GDP figures. (Interesting aside: Brussels is the richest NUTS region in Europe, after London.) But I mean I just don't know anything about the thing with household incomes. The link doesn't seem to be operative right now: presumably much of the difference is due to tax and socialized provision of certain services, etc.?

Hold on, just opened it up in Excel. The figures can't possibly be true, with the Swiss numbers at $27,000, $4,000 below the American level (and head-to-head with Australia). That's just not possible. The average household income in Switzerland, the last time I lookedit up, is something like $80,000.

Well, sure, median and mean would be different. But not by that much. Probably more like +/-25%. I am pretty solid on the SF80,000 figure (that's actually a bit more in USD), as I got that from the Swiss government. Whatever it is, it is much higher than anywhere in the United States except for perhaps Connecticut, New Jersey (where more 1/8 of households have annual incomes of above $100,000) and Maryland.

Why would you imagine that the mean and median would not be that different? Supposing you have a fluent Chinese speaker taking a college Chinese course for cheap credit (happens). Her/his grade would have a MUCH MUCH bigger effect on the mean grade than on the medium.

Now consider a world in which a small number of people make vastly, vastly more than others, on the order of hundreds or thousands of times. That is, our world. We would EXPECT the mean and the median to be miles apart.

Now consider a world in which a small number of people make vastly, vastly more than others, on the order of hundreds or thousands of times. That is, our world. We would EXPECT the mean and the median to be miles apart.

Except in this world, the reality happens to be that the mean and median in Western countries are rarely more than one-quarter apart. I was looking the municipal incomes data some time earlier, and what struck me was how much the median and the mean actually tracked each other.

In any case, whatever it is, there's simply no way that Switzerland has an average of 80,000 and a mean of 27,000, especially given its relatively small inequality. One of the numbers is just off, and I am pretty sure it's the OECD one.

One of the numbers is just off, and I am pretty sure it's the OECD one.

My guess is that your $80k figure is based on nominal income, which is useless for comparing income levels across nations. The OECD, like everyone else, uses Purchasing Parity Power to compare incomes.

The fact remains that $60k - the number you quoted - is a lot of money in France. You can continue to shift goalposts, argue trivia and change the subject. Or you can simply acknowledge your error and move on.

The very detailed wikipedia page on US household incomes puts the gap between mean and median income at nearly 40%---quite a bit higher than 25%.

This is not the PPP number. Things become much closer when you compare PPP numbers. The difference between mean and median indeed becomes relatively small when you compare PPP numbers for Switzerland, although wikipedia has the for different years, but three years isn't enough time to make a huge difference there.

The fact remains that $60k - the number you quoted - is a lot of money in France.

The OECD figures are, according to the Excel file, disposable. Presumably that's after tax. (Expat websites, such as Expatistan, calculate incomes post-tax.) To get a disposable of $60k in a jurisdiction like France, you need a nominal income of probably no less than $100-$110k. If you have a nominal income of $60k, you have a disposable income of probably between $30-$40k. The 60,000 (forgot if it was euros or dollars) figure I gave for French doctors was definitely pre-tax nominal. Which means they have a disposable of $40k at best, and that's middle class. Sorry for forgetting to note this earlier on.

My guess is that your $80k figure is based on nominal income, which is useless for comparing income levels across nations. The OECD, like everyone else, uses Purchasing Parity Power to compare incomes.

Having lived in a middle-income country, I have found it expedient to just ignore PPP numbers (which are basically fatuous) to just look at the nominal. For a lot of things in life (even including food), PPP just doesn't mean anything. You can live without Big Macs, but you can't live without grain and vegetables, and these things are rarely priced in PPP terms (as they are often commodities).

The very detailed wikipedia page on US household incomes puts the gap between mean and median income at nearly 40%---quite a bit higher than 25%.

I'm vaguely aware of this, although the U.S. is a bit of an outlier as it is an extremely rich country, but also uneven (as it is lacks a lot of the transfer and smoothing mechanisms in other Western countries).

Also: I am a bit leery of looking at whole-U.S. household income numbers because of the scale. It's probably much more useful to compare state-by-state. (Again, the astounding statistic that more than one-eighths

Ironically it is the rightwingers who run around claiming 50% of the country pays no taxes, when in fact those people play plenty of taxes. Just not income taxes...because in sharp contrast to G.E., they have almost no income.~

By the way, I think Megan is wrong on the prospect of Greek default. In the short and medium term, it would be good for Greece. But in the long-run, it would mean a structural divergence from the high-productivity, high-revenue northern European economies resulting in Greece joining the ranks of Argentina and so on in the ranks of permanently middle-income countries.

(The old quip about Brazil being perpetually the country of the future.)

Which means they have a disposable of $40k at best, and that's middle class.

Nope. Still wrong. Disposable income of $40k versus median disposable of merely 19k. That is double the median and therefore upper class.

Oh, and you made me LOL at your "enlightened" explanation of why you reject all the relevant figures. Perhaps one day you can lower yourself to work for the OECD and explain to them "proper" economics.

Jeezus, even Myles can't be arsed to listen to himself. He ends one of his monotonous screeds in mid sentence and doesn't notice.

I think Myles himself is some kind of meta or recursive demonstration of the harm that Megan does. Not only can she not think, or write, or reason but those who read her too sympathetically or uncritically must also have those faculties destroyed. She must be come kind of viral brain destroying morality sucker--sorry, just spent the afternoon watching old Buffies with my daughter and the notion of personifying moral evil with demon types strikes me as very reasonable.

If you don't like int'l bankers, you should seriously dislike Iceland. For most of the last decade, Iceland was basically a hedge fund with 318,452 investors (its population). The Icelanders were pretty much complicit in wiping out the savings of British and Dutch (I think?) depositors.

Perhaps one day you can lower yourself to work for the OECD and explain to them "proper" economics.

Anyone working at OECD is at least a hundredfold smarter than me, but PPP comparisons are just not very useful. The price of agricultural commodities, for example, is entirely nominal.

He ends one of his monotonous screeds in mid sentence and doesn't notice.

Why is it necessary for you to insult people? Free country and everything, but still.

Nope. Still wrong. Disposable income of $40k versus median disposable of merely 19k. That is double the median and therefore upper class.

Fair enough, but $40k a year in disposable income is 3300 dollars approximately a month. That's a middle class disposable income in any G7 country, in the sense that it allows to you lead a largely middle-class lifestyle.

There are lots of people in certain (economically disadvantaged) parts of Portugal making €500 a month. That does not make €1,000 a month an upper middle class income, even in Portugal.

McMegan said exactly the same thing about Krugman, and then proceeded to insist that he knows nothing and she knows everything. It is cute how you slavishly imitate her.

The price of agricultural commodities, for example, is entirely nominal.

People don't eat "agricultural commodities". It is the price of bread that matters, not wheat. Also, there is something called the currency exchange rate which makes nominal comparisons meaningless. Once again, you demonstrate astonishing ignorance of basic economic facts.

in the sense that it allows to you lead a largely middle-class lifestyle.

So now your argument is that because wealthy people can live a middle-class lifestyle, they are actually middle class!

Myles, it isn't necessary for me to insult people. It is a pleasure, however, for me to insult *you.* You are an absolute moron and your writing here reveals that you are amoral to boot. You are owed nothing, not even common courtesy. It is a free country, but that's not why I do it. I do it because what you write, and the tedious insistence with which you write it, are an insult to all rational, thoughtful, moral people everywhere.

Guess what, Myles: maybe your interlocutors are not likely to be fans of Posner...

And yes, you've said that before and in the context of slavery and emancipation in a Crooked Timber thread, I recall. But most of the people you're arguing with take a very strong moral perspective on economic relations. So perhaps your arguments are largely besides the point.

But most of the people you're arguing with take a very strong moral perspective on economic relations.

But I think it could be argued that this is irrational. Economic relations are fundamentally amoral. If they are moral relations, they wouldn't be economic relations, but personal, ethical, and sympathetic ones. Even relations that have both (and most relations do) can be separated into the two components.

Economics is a positive science, not a normative one, or so I was taught. It's up to politics, not economics, to make the moral decisions, even though they might sometime result in less economically efficient outcomes (the minimum wage, for example). My interest is in economics, not politics.

Economics is a positive science, not a normative one, or so I was taught. It's up to politics, not economics, to make the moral decisions, even though they might sometime result in less economically efficient outcomes (the minimum wage, for example). My interest is in economics, not politics.

This is easily one of the most disgusting paragraphs I've read in a long while.

You're a horrible human being Myles - absolutely horrible. And if you don't understand exactly why you're a horrible, awful disgusting piece of work read that last paragraph back to yourself out loud. Stand in front of a mirror and do it and see if you can look yourself in the eyes while you do it.

People like you make this world a miserable place. And you do it in such awful mundane ways. So much of the "mundanity of evil" is wrapped up in that paragraph it actually makes me physically pained to read it.

Your teachers should be ashamed of themselves if you came out of your classes believing the ugliness that you spew.

But even that being as it may, the actual predictive power of economics has not been shown to be, ahem, any good, so claims of it being a "positive science" seem rather premature. And there's ample evidence to show that economics students and even well-known economists treat economics normatively.

There isn't even any general agreement on how to discriminate between good and bad models, the various factions rigging the criteria to suit their particular ends (and funders).

That suggests that moral argument is the foundation of any economic analysis, or at least no worse than economics in predicting outcomes.

But even that being as it may, the actual predictive power of economics has not been shown to be, ahem, any good, so claims of it being a "positive science" seem rather premature. And there's ample evidence to show that economics students and even well-known economists treat economics normatively.

Not really. The basic architecture of economics is utterly sound. It's the misapplication of things like the Gaussian copula that's insane, but that has nothing to do with actual economics, and lots to do with plain greed. The area I am really interested in is free trade, and over decades-long time horizons attempts to game trade have all failed. The Japanese economy is in the stagnant shape it is today precisely because of the misunderstood application of economics in pursuit of gaming trade in a mercantilist fashion, which as neoclassical theory predicted, would end up harming Japan itself. (And South Korea isn't even economically developed enough on a per capita basis (its GDP per capita is half that of Japan) to enter into this discussion.)

I'm sorry: we now have to define what we mean by "soundness" here. The "basic architecture" of economic is not even really a matter of wide agreement, and in the ideological subgroupings that it has developed, there is a lot of conceptual incoherence papered over with "Gaussian copulas" and whatever. (And I say this as an occasional RL practitioner of Bayesian whatchamacallits.)

Even leaving side the underlying conceptual disagreements, there is a matter of much greater import that some kind of internal analytic soundness, and that it in its value for policymaking, which has taken a very public beating in the past few years.

The instability imposed upon the (actually historically very recent) American middle class is having effects that were easily predicted through a large-scale moral-historical analysis---I and many others were talking about this on the Internet for years. The "hide-and-go-seek" implicit moral analysis that underpins most mainstream schools of economics, on the other hand, has been found deeply wanting when it really counted.

Setting aside every other piece of bullshit myles has spouted on this thread "Economics" are not fundamentlly "amoral." You can not have economics without morality, since you can't have any kind of economic system (production or exchange) without some notion of ownership and ownership derives its existence from a social system and a set of laws to determine how labor and its product will be allocated. Naughty or nice, class based or communist, there is always law, society, and morality at the base of every human economic interaction. Anything else isn't economics any more than ants have economies.

Now I think we all know Myles' style well enough to know that he will leap from this perfectly obvious fact (economies are both social and moral, not amoral and not independent of society) to something tangentially related about borneo, or monkeys, or Montesquieu, or anything as long as it enables him to avoid addressing the holes in his argument.

Do you ever get tired of being jaw droppingly stupid on the internet, Myles? Because its almost startling how much fail you can pack into your brief posts. Do you not grasp that even in the randomly drawn pool of us, your anonymous or pseudonymous interlocutors, you are facing people who are actually much better educated than you are? People who can't be startled by your absurd name dropping of Posner, or any other of your badly understood heroes?

Every time I read one of your posts I am reminded of the character Otto from A Fish Called Wanda.

I can't help but wonder who Myles thinks will be impressed by his arguments. Well-educated people will know he is not able to synthesize information, and badly educated people will be able to see the disconnect between reality and Myles' airy Cloud Minders theorizing.

Late to the party, as always, but jebus fuckberg christ.Myles, moral philosophy does not equal morality. Posner is attempting to appropriate Nietzschean, or really, at this point, modern continental, ideas for purposes which are actually contrary to the underlying philosophy. Amoral, in a philosophic context, does not mean sociopathic. It means being a developed enough being such as to not need an external authority to determine your values for you. Your fail intro to logic attempt at appeal to authority shows how utterly you fail to grasp this fairly simple and basic point. Stick to Ayn Rand, even a banal and flawed thinker like Posner seems above your capabilities.